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Pre-Approval Letter Challenges
Regardless of whether it is tradition, laziness, ignorance, or a defiance of best practices, loan officers have relied on editable Word® documents, allowing real estate agents to edit their pre-approval letters!
Why is this practice happening? It is convenient! It minimizes lender interruptions every time the Realtor needs a pre-approval letter (often during nights and weekends). More importantly, Realtors have come to expect this practice. Clearly, lenders and real estate brokers have not thought this practice through to its possible conclusions! The Realtor is not licensed as a lender and exceeds their authority when modifying a pre-approval letter.
Often the practice of distributing editable pre-approval letters to Realtors is viewed as harmless because loan officers and Realtors can rely on loan contingencies in the purchase contracts to remove their buyers from any transaction if the loan is not approved given the contract provisions.
The ultimate reality is that when a Realtor changes a pre-approval letter, even a little bit without the lender’s knowledge and approval, they are representing to the seller and the seller’s Realtor that the document has been prepared by the lender. This is, at a minimum, misrepresentation, and may be tantamount to fraud!
How Does LenderLetter Solve These Problems?
Built-in lender controls.
The LenderLetter.com environment allows the lender to maintain field level controls over every variable in each letter. Realtors and Buyers are prevented from editing any variable the lender has not allowed to be changed!
LenderLetter.com is always available, allowing all parties to a transaction the access needed to generate an instant pre-approval letter.
Realtors and buyers won’t miss out on submitting an offer or responding to a counter-offer in a timely fashion. More importantly, every letter may always reflect the offer price and terms.
All parties are instantly notified via email when a letter change is made with details as to what was changed, who made the change, and finally, when the change was made (adjusted for all time zones).
This feature keeps a detailed log for all to see and further allows keeping the lender informed of all letter activity. The actual letters are also preserved and cannot be deleted once generated, maintaining an extensive paper trail.
Letter recipients may authenticate any letter using our Patent Pending Two-Factor Authentication system. It mitigates fraud!
Any letter recipient may instantly authenticate any pre-approval letter generated by the LenderLetter.com system. All hand-held smart devices and computers may scan a QR code visible on each letter and this opens a special web page on the LenderLetter.com website. The recipient then enters the 5-digit code that accompanies the QR code and clicks on a Submit button. A low resolution, watermarked version of the letter is displayed so any recipient may compare the received letter to the LenderLetter.com system generated letter to validate that the two letters match. This frees up time from attempting to reach the loan officer that signed the letter to verify its contents and authenticity.
Allows for a “one and done” process for lenders.
After initial account setup, lenders will rarely have to perform periodic updates because the system maintains each buyer’s limits established by the lender. In addition, lender loan program parameters like front & back end ratios, minimum down payments, and other details may be stored for instant recall and use.
Finally, a buyer’s buying power may change if there are HOA fees or some other periodic payment not previously factored into a buyer’s profile or letter. Therefore, Lenderletter.com has included what is called The LenderLetter Max Price Calculator.
The calculator allows for any unknown cost (like HOA fees or special tax assessments) to be entered into the LenderLetter system and automatically adjust the maximum price a buyer may afford. This adjustment is made in real-time as the lender, Realtor or buyer enter in the periodic fee.
LenderLetter’s Efforts to Educate and Modify Behavior
LenderLetter, LLC is on a mission to educate lenders and Realtors of the dangers of using editable pre-approval letters given out by lenders. These editable (un-protected) documents may come in different formats like Microsoft Word® documents, or any other editable electronic format.
LenderLetter, LLC is seeking the guidance and support from states and national Realtor associations and national lender organizations by obtaining opinion letters and other legal opinions to bring awareness to this dangerous practice.
LenderLetter, LLC encourages all lending institutions and real estate brokerages to include company policies precluding their loan officers from offering and Realtors from accepting any form of an editable pre-approval/pre-qualification letter where the lender is not in complete control of each letter.